OSFI Finalizes Guideline on Large Exposure Limits for D-SIBs in Canada

The new version of Guideline B-2 includes the following:

• Introduces tighter limits for exposures to both global systemically important banks (G-SIBs) and to other Canadian D-SIBs
• Recognizes eligible credit risk mitigation techniques by measuring exposure on a net basis rather than on a gross basis
• Reduces the eligible capital base from total capital to tier 1 capital

The guideline, which was originally issued in 1994, establishes limits for the exposure of a bank to a single counterparty (including connected counterparties), measured as a percentage of capital. In 2014, BCBS published its standard on large exposure risk management. The final guideline of OSFI incorporates the BCBS guidance to reflect current risk management sound practices and provides additional guidance on the methods that OSFI expects D-SIBs to use for identifying, measuring, managing and monitoring large exposures.

Related Links

• Press Release
• Guideline B-2
• Impact Analysis Statement
• OSFI Letter and Response to Feedback Received

Effective Date: November 01, 2019

Keywords: Americas, Canada, Banking, Large Exposures, Basel III, D-SIBs, Concentration Risk, Guideline B-2, OSFI